The challenge of populist parties to the established political order will be tested in three major European General Elections in 2017. The first of these is in the Netherlands on March 15.

The electoral surprises of 2016 in the UK and the US have led to a state of heightened political uncertainty moving into 2017.

The far right Freedom Party (PVV) led by Geert Wilders won 10% of the popular vote in the last election in 2012. They are now polling in the high teens. Most recent polls are indicating that the PVV is losing some ground versus the VVD (the leading party in the current coalition).

At present all of the other leading parties except the VVD are refusing to contemplate going into a coalition with the PVV. The VVD have said that they will only do so if there is a major reversal of some of the PVV’s controversial but key policies.

The Dutch system of proportional representation tends to lead to a multi-party coalition government and 2017 is unlikely to be an exception.

Dutch coalition government take time to form (96 days on average over the past 50 years). The negotiation period could usher in a period of uncertainty and it is possible that the anti-PVV stance of the major parties could weaken.

The most likely outcome, however, is that the PVV will be excluded and that there will be a centre-right coalition with the VVD, the CDA, and D66 as well as one or two smaller parties.

In the unlikely event that the PVV do manage to enter a coalition government and they demand a referendum on European Union (EU) and single currency membership. However, it is highly unlikely that the other coalition parties would support this.

Even if the PVV are successful in holding a referendum the Dutch population are not particularly Eurosceptic or anti-euro and sentiment would have to change considerably for the Netherlands to leave either institution.

Although the consequences for the investment climate of the PVV entering government are potentially quite severe in the Netherlands, the markets are currently very calm. The spread between Dutch and German 10-year government bond yields has risen recently but the increase since the surprise US presidential election result is modest and well below the increase experienced by a number of other European countries.

Well known for their anti-immigration policies the PVV are also in favour of the Netherlands leaving both the single currency and the EU. While the topic of a potential exit has retreated to the background of the political agenda, it is clear that the implications of exiting the single currency and / or the EU would trigger uncertainty in the Netherlands and the wider Union.